Daily Market Color

Oil Slides with Production Uncertainty While U.S. Dollar Touches 11-Week High

Crude oil prices finished lower today, retreating from yesterday’s 15-month high levels that were prompted by comments from Russian President Vladimir Putin.  At the World Energy Conference in Istanbul on Monday, Putin expressed his willingness to have Russia participate with OPEC members in curbing oil production to stabilize crude prices, leading to a 3.1% rise in crude prices.  However today, Russian oil executive Igor Sechin, head of state-controlled energy company Rosneft, provided a contradictory view to Putin’s when he stated that his company would not take part in any production cutting/freezing agreements.  The contrasting statements sparked concerns over the future enactment of last month’s supply deal, although OPEC will hold talks with non-member oil producers tomorrow with the intention of coming to agreement on a six month production cap.    

The US dollar reached an 11-week high today after the probability of a rate hike by December 2016 having moved to over 70% with tomorrow’s release of the September FOMC meeting minutes on the horizon.  The British pound continued its dramatic slide, down 0.8% to $1.23 per pound for the day, while the euro’s value fell to a two-month low of $1.108.  With the pound’s weakening, U.K. equities touched all-time highs during the session.  European stocks fell on the day, weighed down by shares in oil companies.  Asian markets were mixed, highlighted by Samsung’s 8% drop and the Japanese yen posting further losses against the dollar, as it reached 103.85 JPY/$.

All three major U.S. stock indexes are down 1.25%-1.75% on the day as the third-quarter earnings season kicked off, while Treasury yields are 3-4 bps higher across the curve with the yield on the 10-year note hitting a 4-month intraday high of 1.78%.  WTI crude dropped 1.5% to $50.60/barrel while Brent crude shaved off 1.75% to $52.20/barrel.

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